Before he became California’s president pro tem of the Senate – thus gaining the thankless chore of dealing with the state’s immense budget crisis – Darrell Steinberg was best known for a 2004 ballot measure that raised income taxes on the wealthy for local mental health services.

Steinberg’s Proposition 63 was his response to a four-decades-old promise, which had never been fully honored, to bolster local services as a trade-off to releasing thousands of patients from state mental hospitals.

Then-Gov. Ronald Reagan, who wanted to trim state spending, and the Legislature’s liberal Democrats, who wanted to give mental patients more rights, agreed that community-based psychiatric services would be better than keeping them in state hospitals.

Subsequent governors and Legislatures, however, routinely shorted the community-based programs as they faced other demands for money, especially after Proposition 13, passed in 1978, shifted the onus of financing education and other hitherto local services to the state.

Steinberg, a state assemblyman from Sacramento, teamed up with mental health advocates to write Proposition 63 in 2004, imposing a 1 percent surcharge on taxable incomes of $1 million or more and raising about $800 million a year.

Opponents in anti-tax groups argued that tapping the highest-income taxpayers would be discriminatory. Steinberg argued that “the ultimate in discrimination is how we’ve treated the mentally ill.” Voters agreed, 54 percent to 46 percent.

The money rolled in as anticipated, more than $3 billion in the first four years. But it didn’t roll out nearly as quickly because the state had no mechanism in place for making grants to local mental health agencies.

An audit conducted by the state Department of Finance last year found that while $2.9 billion had been allocated on paper for county-based mental health services, only $1 billion had been approved for distribution, and just $726 million had actually been dispensed.

“An overall documented plan for the development and implementation … does not exist,” the sharply worded audit, dispatched to the Legislature, concludes. The audit detailed how bureaucratic inertia and cumbersome paperwork were leaving Proposition 63’s revenue unspent.

The unspent money did not go unnoticed, however, as the Legislature – now with Steinberg the head of the Senate – and Gov. Arnold Schwarzenegger began grappling with the state’s immense budget deficit.

During private negotiations over how to close the gap, legislative leaders and the governor agreed to ask voters to alter Proposition 63 and shift nearly a half-billion in unspent dollars to state mental health services that otherwise were in danger of being reduced.

Steinberg, albeit reluctantly, had to ask his colleagues to partially undo what had been his proudest achievement, an ironic twist to the fiscal crisis and an echo of that four-decades-old unfulfilled promise.